The U.S. economy disappointed even the low expectations of macro-analysts Wednesday, as the Commerce Department announced that Gross Domestic Product (GDP) growth slowed to an annualized rate of .2 percent in the first quarter of 2015. Most experts had predicted a seasonally-adjusted number of around 1 percent growth, down from 2.2 percent in the previous quarter.
The Federal Reserve issued a statement blaming “transitory factors” such as the brutally cold and snowy winter in much of the East, and the West Coast port shutdowns, for the lack of growth. Other more permanent factors may be at play however, such as the lack of business investment, lower consumer spending despite a drop in gas prices, and a stronger dollar, which reduced exports by 13.3 percent. Even the fall of oil prices put a dent in Q1 GDP, as domestic drilling investment was cut by $25 billion.
Despite the bad production numbers, both the Fed and other economic forecasters believe that 2015 Q1 will be an outlier compared to the next three quarters. The unemployment rate has fallen at a steady rate since November 2010 (591,000 jobs were added in Q1), and the consumer confidence index has been on the rise since late 2011, both which indicate the capability of the economy to produce more once the weather warms up.
One more statistic of note which should put the .2 percent number in perspective: 2014 Q1 GDP growth came in at -2.2 percent. In Q2, GDP jumped to an annualized rate of over +4 percent.
[Washington Post] [Photo courtesy Gene Puskar/AP]